Download Electricity Supply Board

Electricity Supply Board
Investor Presentation
2011 Results and
Summary Update
June 2011
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Disclaimer
Forward looking statements: This presentation contains certain “forward-looking statements” with respect to ESB’s financial
condition, results of operations and business and certain of ESB’s plans and objectives with respect to these items. By their very
nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to
and depend upon future events and circumstances. There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied by these forward-looking statements. All forward-looking
statements in the presentation are expressly qualified in their entirety by such factors. ESB does not intend to update these
forward-looking statements.
No warranty as to accuracy: Neither ESB nor any person acting on its behalf makes any representation or warranty, express or
implied, as to the accuracy or completeness of the information contained within this presentation. Neither ESB nor any person
acting on its behalf shall have any liability whatsoever for loss, howsoever arising, directly or indirectly, from use of the information
contained within this presentation.
No invitation to engage in investment activity: This document is not an offer to sell, exchange or transfer any securities of ESB
nor any of its subsidiaries and is not soliciting an offer to purchase, exchange or transfer such securities in any jurisdiction. This
document is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or
use would be contrary to local law or regulation.
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Context of Presentation
This presentation was given to US Private Placement holders/potential holders
of ESB debt as part of an update following the publication of ESB’s 2011
financial results. The information contained herein is relevant to the date of
presentation (June 7th 2012).
Neither ESB nor any person acting on its behalf makes any representation or
warranty, express or implied, as to the accuracy or completeness of the
information contained within this presentation.
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Introduction of ESB Team
Donal Flynn – Group Finance Director
Paul Stapleton – Group Treasurer
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Agenda
1. ESB Overview & Strategy
2. 2011 Review
• Business Environment
• Summary Financials
• Funding and Liquidity
3. Looking Forward
• Irish Economy
• ESB Business
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ESB Overview
Networks (Transmission and Distribution)
ESB Networks
NIE
Generation
Energy International
Supply
Electric Ireland
History:
Established 1927, Vertically Integrated, 95% Government owned; Track Record of Delivery
Networks:
Owner of the regulated Republic of Ireland T&D networks (RAB €6.4bn)
Owner of the Regulated Northern Ireland T&D networks (RAB £1.2bn)
Generation:
All-Island Capacity of 4.4GW, GB Capacity of 1.2GW
Supply:
1.4 million Customers served on an All-Island basis
International:
Strong Asset position in UK; Successful International Engineering Business
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ESB Asset Profile
Key Points
Assets by Business
Supply, 4%
66% of assets are fully regulated Transmission and
Distribution network assets. ESB own 100% of T&D
assets in ROI and NI
Stable, established and well understood regulatory
environment
Balanced Generation-Supply position. All-Island
generation market share of 43% by capacity and
46% by volume. All-Island supply market share of
39%
28% of assets outside ROI
Generation,
28%
Other, 2%
Networks, 66%
TOTAL ASSETS: €12 Billion
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ESB Strategy Summary
Capex €5bn to €6bn over 5 yrs
Leading Irish Energy Utility competing
successfully across the Value Chain
Focussed on maintaining financial strength;
Strong investment grade metrics
€0.9Bn
€1.0Bn to €1.25bn p.a.
All Island position on T&D Networks – growth
through investment; leadership in performance and
Smart Grid development
Renewed, diversified Generation Portfolio
positioned to compete strongly in the All Island and
emerging All Islands Market; Growth in GB
Rebranded and repositioned Supply business
competing to serve Customers in Electricity, Gas
and Energy Services
2012
2013
2014
2015
2016
70% Capex on Regulated Networks Assets
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Supportive Government Policy
Irish Government developing a strategic perspective on State Assets
July 2011 – Government Decision on Transmission Asset Ownership in context of EU Third
Energy Package:
ESB to retain ownership of the Electricity Transmission assets
September 2011 - Establishment of NewERA - a new ‘Shareholder Executive’ function under the
National Treasury Management Agency to manage the Governments shareholding in
Commercial Semi-state companies.
September 2011 - Government decision to sell a minority stake in ESB as an integrated utility
Maintain ESB as a Vertically Integrated Utility under State Control
February 2012 – Decision not to proceed with minority sale
Sale of only some non strategic generation assets
Government reaffirms its commitment to maintaining ESB as a Vertically Integrated Utility
under State control
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Agenda
1. ESB Overview & Strategy
2. 2011 Review
• Business Environment
• Summary Financials
• Funding and Liquidity
3. Looking Forward
• Irish Economy
• ESB Business
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Business Environment 2011
ESB Highlights
Ireland
Strong export growth
Balance of payments surplus
Gradual recovery with positive GDP
growth
Troika targets met
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Return to Economic Growth
Strong 2011 financial performance
Stable Regulated Networks income
Cost reduction programme on target with
€165m delivered to date
Delivery of continued investment
programme with Capex of €0.9bn
Bad debts low and reducing to 0.8% of
income
Stabilised market share following full deregulation of supply from April 1st 2011
GDP %
4
% change yoy
2
0
(2)
(4)
(6)
(8)
2007
2008
2009
2010
2011
Source: CSO
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Summary ESB 2011 Financials
Operating Profit (€m)
EBITDA (€m)
1,121
814
469
839
753
2008
2009
2010
2011
EBITDA up 34% on 2010 at €1.12bn
340
350
339
2008
2009
2010
2011
Operating Profit (adjusted*) up 38%
on 2010 at €469m
* 2010 excludes the impact of an exceptional pension charge (€330 million). 2009 excludes the impact of an exceptional profit on disposal (€265 million)
** Numbers are based on IFRS accounting.
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EBITDA
EBITDA Versus Adjusted EBITDA Calculation
1,084
1,000
1,121
963
843
814
EBITDA Adjusted
839
Group PBIT + JV PBIT +
Depreciation – Amortisation –
Financing Charge on Provisions +/non cash items
753
EBITDA as per IFRS Audited Accounts
Group PBIT (before exceptional
charges) + Depreciation –
Amortisation
=> Difference mainly due to non-cash
IAS 19 adjustment and JV PBIT
2008
2009
2010
2011
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2011 Interest Cover & Gearing
Gearing % (IFRS)
Interest Cover (IFRS)
7.1x
52
50
9.0x
Debt/RAB
40
7.0x
~ 60%
35
5.3x
2008
2009
2010
2011
Interest Cover (GAAP)
2008
2009
2010
2011
Gearing % (GAAP)
67.5%
4.9x
53.2%
3.5x
Covenant
2011
Covenant
2011
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Other Key Metrics
Group Bad Debts as a % of Revenue
Generation 2011 Market Share
ESB Energy
ESB Energy
International
international
46%46%
1.2%
1.0%
0.8%
0.4%
2008
2009
2010
Independent power
producers
54%
Independent
power producers
2011
54%
Supply 2011 Market Share
Attracting new customers
10,000
Market Deregulation
ESB Electric
Electric Ireland
Ireland
Customers
5,000
39%
-
39%
-5,000
-10,000
Independent
Independent
energy
suppliers
energy
suppliers
61%
-15,000
Monthly net customer losses/gains
-20,000
Apr-12
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
61%
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Reducing Cost Base
Target €280m annual cost reductions
between 2010 and 2015 (equates to an
overall reduction of 25%)
Cost Savings (€m)
Target
5 Year Savings Target
€165m annual achieved to date
Substantial headcount reductions have
already been achieved and further
targeted as part of Pay Agreement
negotiated in 2011
Achieved to date
280
- Savings 2010
95
- Savings 2011
70
280
165
Pay Agreement negotiated in 2011:
Target: 1,000 exits by 2015 (700 on Voluntary Severance)
ESB Group Headcount
ESB
reached
agreement
on
restructuring its pension scheme in
2010, resolving a €2bn actuarial deficit
8,000
7,500
7,000
April 2012 – ESB staff accept
proposals for c. 1,000 staff reductions
and €140m p.a. in overall payroll cost
reductions
7,701
7,836
7,536
6,500
6,911
6,827
2010
2011
6,000
2007
2008
2009
Note: 2011 excludes staff numbers for NIE of c. 1,400
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Agenda
1. ESB Overview & Strategy
2. 2011 Review
• Business Environment
• Summary Financials
• Funding and Liquidity
3. Looking Forward
• Irish Economy
• ESB Business
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ESB Continues to Fund Successfully
€1.3bn new Funding
Raised in 2011
NIE 15 Year Bond
Bank Syndicated Term Loan
EIB Loan
Carbon sale/buyback
Bank Bilateral Loans
£400m
£308m
€235m
€145m
€125m
4.5%
8.5 Years
£810m NIE
Acquisition loan
repaid
Full repayment of NIE acquisition facility of £810m
without exercising optional extension
Prudent Capital
Planning
Prudent management of capital expenditure levels:
Reduction of €0.7Bn in 2012/13 capex approved
by the ESB Board.
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Debt & Liquidity
December 2011
Group Debt €4.6Bn
Available Liquidity €1.2Bn
22%
24%
78%
76%
Fixed
Floating
Cash
Committed
Facilities
€1.2Bn in undrawn committed facilities (incl cash) at end 2011,
of which €960m is immediately available.
Note. Group includes Subsidiaries & excludes JV’s. Fixed includes Inflation Linked.
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ESB Funding Sources
Private Placement
3%
19%
2%
26%
EIB
Eurobond
Project Finance
Bank Term
9%
2%
17%
22%
Bank RCF
Carbon
Leases
Total ESB Group Debt €4.6bn*
ESB Sources Finance From A Diverse Range Of Sources
Group includes subsidiaries, excludes JVs.
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€m
Current Debt Repayment Profile
1100
900
700
500
300
100
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
-100
Bank
LEASES
Private Placement
Bonds
Projects
RCF
Carbon
Profile is very manageable: €1.2Bn existing liquidity and EBITDA > €1Bn p.a.
Any 2012 Funding will be used primarily to refinance debt maturing in 2013 & 2014
Plan to renew Bank RCF Facility in 2013 – well in advance of maturity.
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ESB Credit Ratings: BBB+/Baa3/BBB+
S&P – BBB+ (neg.)
(Re-affirmed 18 Jan 2012)
“strong business risk profile underpinned by leading market position in the Irish electricity market”
“significant proportion of stable and predictable cash flows from its low-risk regulated electricity transmission and
distribution network operations”
“its cost-saving program is aiding profitability......its cash flow coverage of debt ratios could strengthen from 2012”
“ESB has integrated and well-balanced power generation and supply operations”
“About 70% of capex is being invested in regulated assets, which will boost earnings”
Moodys – Baa3 (neg.)
(Re-affirmed 17 Oct 2011)
“Despite ESB’s currently solid standalone financial position, its ratings are constrained by that of Ireland”
“A one notch differential between ESB and Ireland is considered appropriate”
“Significant improvement in ESB's liquidity position due to the recent refinancing of short-term debt and the Group's
intention to re-phase or defer capital expenditure”
“high proportion of earnings arising from the company's transmission and distribution operations in the Republic of Ireland
and Northern Ireland”
“low business risk profile and stable returns under well-established and transparent regulatory frameworks”
“ESB’s networks business is complemented by a well balanced generation and supply operation”
“well diversified portfolio of generating assets, with a mix of fuel types and base load and peaking capacity”
Fitch – BBB+ (neg.)
(Re-affirmed 11 Jan 2012)
“improved liquidity position after it raised EUR1.4bn of new debt (with an average cost of 4.5%) during 2011”
“Around 65% of the expected earnings…over the next four years will derive from the regulated network businesses,
compared with up to about one-third for most peers.”
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Agenda
1. ESB Overview & Strategy
2. 2011 Review
• Business Environment
• Summary Financials
• Funding and Liquidity
3. Looking Forward
• Irish Economy
• ESB Business
www.esb.ie
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Ireland’s Progress
Forecast GDP – source IMF
GDP expected to grow by 2.0 to 2.5 per
cent on average over the next 5 years
2.9
2.0
1.7
Strong export growth expected to
continue; exports total c. 100% of GDP
0.9
0.5
Significant correction in unit labour costs
with a reduction of c. 15% expected by
2013
-0.3
2012
2013
Euro Area
2017
Ireland
Unit Labour Costs 2009-2013 (%Change)
10 year yields on Irish Government bond
have fallen from above 14 per cent to c.
7.5 per cent over the past year
Germany
France
Italy
Eurozone
Ireland Ranked second for Inward
Investment per Capita (Source: IBM’s
2011 Global Location Trends report)
UK
Ireland
Spain
Portugal
Greece
-16
-12
-8
-4
0
4
8
12
16
Source: EU Commission May 2012
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Foreign Direct Investment
Over 1,000 oversees companies located in Ireland (515 US Companies)
Source: IDA Ireland
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ESB 2012 & Beyond
ESB to remain a strong State owned Vertically Integrated Utility
Continued investment in regulated network assets
New generation investment focussed in the UK (e.g. project
financing of Carrington Power)
Further delivery of cost reduction program with expected savings of
€280m per annum by 2015 (60 per cent delivered to date)
Continued strong financial performance remains top priority
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